Best of the Week
Most Popular
1.RED ALERT: Paris Terror Attacks - What to Expect Next - STRATFOR
2.Paris Terror Attacks, Death Pangs of a Dying Religion, and Impact on BrExit EU Referendum - Nadeem_Walayat
3.Paris Terror Attacks, Islamic State Attempting to Spark Civil War in France - Nadeem_Walayat
4.Three Shocking Charts That Prove Gold Price Rally Is Coming - Sean Brodrick
5.Stock Market Nifty-Fifty Becomes Fab-Five; Return of the 'Four Horseman' - Mike_Shedlock
6.Africa Population Explosion - Why Europe's Migrant Crisis is Going to Get A Lot Worse - Video - Nadeem_Walayat
7.Gold Mining Stocks May Be The Buy Of The Century - Jeff_Berwick
8.Grandmaster Putin Beats Uncle Sam at His Own Game - Mike_Whitney
9.BRICS? No, CRISIS - Raymond_Matison
10.UK Housing Market Affordability, House Prices Momentum and Trend Forecast - Nadeem_Walayat
Last 5 days
Gold And Silver - No Ending Action, But End May Be Near - 28th Nov 15
Social and Cultural Distress Dividing The Nation - Fourth Turning - 28th Nov 15
Sheffield Houses Prices 2015, Best Estate Agents As Rated by Buyers and Sellers - 28th Nov 15
Stock Market Top Valuations, at a Critical Juncture - 27th Nov 15
The Top Shopping Opportunity on Black Friday - 27th Nov 15
Economics Is About Scarcity, Property, and Relationships - 27th Nov 15
UK Immigration Crisis Hits New Extreme of 336k Net Migration, up 32% on 2014 - 27th Nov 15
Vauxhall Zafira B Fire Danger Recall - What to Do Video - 26th Nov 15
Triggers In US Dollar Collapse - 26th Nov 15
Apple Stock is a 10-Year Short - Bear Market Environment - 26th Nov 15
U.S. Federal Reserve Rate Hike - 26th Nov 15
George Osborne's War on Buy to Let Sector Trending Towards Doomsday - 26th Nov 15
Will Turkey Drag NATO into War With Russia in Syria? - 25th Nov 15
George Osborne’s Autumn Statement and Spending Review Full Text - 25th Nov 15
Will Fresh QE From ECB Boost Gold? - 25th Nov 15
Sheffield, Yorkshire and Humberside House Prices Forecast 2016-2018 - 25th Nov 15
Investors Watch Out For The Auto Industry… - 24th Nov 15
BEA Revises 3rd Quarter 2015 US GDP Economic Growth Upward to 2.07% - 24th Nov 15
Stock Market Supports Are Being Broken - 24th Nov 15
Is Gold Price on the Verge of a Breakout? - 24th Nov 15
Fed’s Tarullo: U.S. Interest Rates Liftoff Should Wait for Signs of Inflation - 24th Nov 15
Silver Price, COT, US Dollar Updates and More - 24th Nov 15
UK Regional House Prices Analysis - Video - 23rd Nov 15
Crude Oil Swinging For The Fences - A 20 to 1 Option Play - 23rd Nov 15
US Dollar, CRB, Oil, Gas, Copper and Gold - The Chartology of Deflation - 23rd Nov 15
UK Regional House Prices, Cheapest and Most Expensive Property Markets - 23rd Nov 15
Stock Market Rally Losing Momentum? - 23rd Nov 15
Will Gold Price Drop Below $1000 Soon? - 23rd Nov 15
Gold and Silver Sector Big Green Light and Low Risk Entry Setup... - 23rd Nov 15
Limits to Economic Growth - Challenge and Choices - 22nd Nov 15
Long Dollar Trade and Current Copper Price Below Cost of Production - 22nd Nov 15
UK Housing Market House Prices Affordability Crisis - Video - 21st Nov 15
The Fed Has Set the Stage for a Stock Market Crash - 21st Nov 15
Stock Market Primary V Wave Continues - 21st Nov 15
Gold And Silver - Value Of Knowing The Trend - 21st Nov 15
UK Footsie Bulls Set To Foot The Bill - 21st Nov 15
UK Housing Market Affordability, House Prices Momentum and Trend Forecast - 21st Nov 15
GDX Gold Miners’ Strong Q3 Results - 20th Nov 15
End of Schengen, Stock Market’s Technical Strength Grows - 20th Nov 15
Justice for All and The Curious Case of Zambia - 20th Nov 15
Paris, Sharm el-Sheikh, and the Resurrection of Old Europe - 20th Nov 15
Silver Prices and The Management of Perception - 20th Nov 15
Stock Market Nifty-Fifty Becomes Fab-Five; Return of the 'Four Horseman' - 20th Nov 15
Waiting for Goldot Again - 20th Nov 15
Michael Curran Goes Down-Market Shopping for Gold Stock Winners - 20th Nov 15
Why Isn’t This Incredibly Bearish Bond Market Development Making the News? - 19th Nov 15
SPX Appears to have Stopped its Rally - 19th Nov 15
The Great Fall Of China Started At Least 4 Years Ago - 19th Nov 15
Using Elliott Waves: As Simple As A-B-C - 19th Nov 15
Has Deflation Been Ddefeated? - 19th Nov 15
Dow Jones Stock Market Index is Not Going to Crash - 19th Nov 15

Free Instant Analysis

Free Instant Technical Analysis

Market Oracle FREE Newsletter

Reasons to Get Excited About Japanese Stocks

Broad Based Declined Across Financial Markets Except the Dollar, The Big One Could Finally Be Here

Stock-Markets / Financial Markets 2010 Jan 21, 2010 - 12:08 PM GMT

By: J_Derek_Blain


Best Financial Markets Analysis ArticleThis week, we are witnessing something that should become fairly "as usual" over the coming months:  Broad based price declines in virtually every major asset except the USD. 

Gold is down about 3% for the week so far, silver is down about 6.5% for the week, and the USD is up (according to our analysis there really isn't much chance of it going anywhere else for the next while).

But here's the interesting thing - finally, after 5 weeks of watching gold top and begin its bear market decline, and the major stock indexes make new highs, we might have just witnessed the turning point in all "risk assets".

And that is really one of the keys, and one thing we have been saying for several months now.   Whenever the precious metals are treated as risk assets for the purposes of capital gains, they are not in a bull market but in a false rally.  The psychology that drives this sort of rally is hope-based, completely mood-driven, and ultimately comes unwound like the thread in a poorly knit sweater.

What we are looking for, here at Investophoria, is despair.  Until we see such a thing in the precious metals we cannot recommend buying them.  If we did without it, we would be advising you to get in line and be "the sucker" who is willing to pay a higher price.  Being dedicated to a philosophy is one thing (i.e. Gold = economic freedom and real possibility for growth), but being blindly glued to an asset of any kind will leave you wondering "how could this happen?" when the psychology unwinds around you.

Our position on metals stays the same - gold is in a shorter-term bear market than silver and should bottom long before the white metal.  We are hoping to have a subscription letter available for when that time comes so that our subscribers will be the first to know when to convert those USDs back into the real money.

The other thing of note (which is far more broad-based in terms of effect) is that it looks like maybe, just maybe, the major indexes have put in their all-time high for this bear market rally.  Perhaps more than a simple "maybe", as the probability of that scenario just increased again this morning.  

All things considered, the Dow has followed our forecasts very well thus far and we feel that the safest bet for conservative investors is to close out all long positions and hold cash - for the more experienced traders and investors, a maximum leveraged short position with a stop set about 30 points above where the minor channel line and major trend line cross is an excellent trading opportunity.

I have received several emails from readers this morning who were absolutely shocked at the declines in precious metals over the past several days - as I said in my last silver article, there were several great opportunities to sell your silver stocks and paper positions at >$18.75 over three trading days.  Those who did not take that opportunity will be hard pressed to find another good exit opportunity above $15.00 / oz.

The next leg down in both gold and silver should be very fast and will take many more by surprise who have run to them seeking to make back the losses they sustained in stocks in the last bear-market leg.  If you have been following my recommendations (and actions), you will be able to sit on the sidelines and be at ease, or be in a solid paper short position and earning money while the crowd loses.  A word of warning about short positions - another anticipation we have is that this decline is going to be so broad based and so fast that you may attempt to close it out and receive a message from your brokerage saying they cannot process your transaction due to sheer volume.  Try to find lower-volume (i.e. flat or mild counter-trend) days to exit positions as the probability of having your transaction processed will be highest.  Make sure you are trading with a broker who has the appropriate facilities to accommodate such scenarios.

Again, I will re-iterate our big-picture position.  We are in a deflationary era.  As such anything based on credit or its availability will first and foremost be pommeled.  There is absolutely no safe place to hide except in cash or its nearest equivalents.  All assets in all classes are going to lose value - some more and some less - while cash increases its purchasing power as total money and its velocity shrink and slow to a crawl.  We are in cash, 20% LEAPS, and watching the action with a feeling of peace.

By J. Derek Blain

© 2010 Copyright J. Derek Blain - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2015 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Biggest Debt Bomb in History